Child tax credit payments started hitting bank accounts today. Here's what you need to know.



Most eligible families in the U.S. will get their first monthly payments of the expanded child tax credit Thursday.

The payments, which were included in the American Rescue Plan, change an existing tax credit by expanding the eligibility pool and increasing the money families get. Under the expanded credit, the IRS, also for the first time, is offering the option to receive the payments monthly, rather than in a lump sum as a tax refund.

The expanded payments are expected to significantly decrease the number of children living in poverty; the White House estimates that child poverty could be reduced by as much as 50 percent.

"I think this is one of the things that the vice president and I will be most proud of when our terms are up," President Joe Biden said in a speech at the White House on Thursday. "This can be life changing for so many families."

The first round of payments will total about $15 billion, according to an administration official. That amount will likely increase in the months to come as more people sign up. Biden said that for each dollar that the tax cut costs, it returns $8 in other benefits that would have been spent down the line.

"Your head, your heart and your budget all lead to the same place," Biden said. "This is the right thing to do and it's the smart thing to do."

Still, the program faces immediate challenges.

Most of the roughly 39 million families who are eligible have filed taxes recently or received stimulus checks and do not need to take any additional steps to receive the monthly benefit. But an estimated 4 million to 8 million eligible children are at risk of missing out because their families are not required to file taxes or they have not done so.

Non-filing households tend to be more vulnerable and the most in need of assistance. And although the Biden administration has rolled out a number of online portals where families can update their information, cumbersome government websites, language and technology barriers, and a general lack of public awareness threaten the impact of the program.

Here's what you need to know about the credit.

Who qualifies?
People who claim children 17 or younger as deductions on their taxes are eligible.

The full enhanced credit will be given to single filers who earn as much as $112,500 and joint filers making up to $150,000 a year. The payments begin to decrease for those making more, with the credit completely phasing out for single payers earning more than $200,000 or for married couples with incomes above $400,000.

The IRS determines the age of a child by how old the child is at the end of the 2021 calendar year. So children turning 18 this year will not be eligible.

There are no work requirements, and you do not need a permanent home to claim the credits.

How much money do you get?
That depends on how old the children are (and how much money you make).

Parents eligible for the full enhanced credit will get $300 a month per child under age 6 and $250 a month per child ages 6 to 17.

The payments max out at $3,600 annually for each child under 6 and $3,000 for those ages 6 to 17.

The credit is fully refundable, meaning families can still benefit even if they have no earned income or do not owe income taxes.

How will the money be distributed?
If you filed taxes in 2019 or 2020 or received a stimulus check, you should get a direct deposit. If the IRS does not have your current banking information, then keep an eye out for a check in the mail.

If you do not see a direct deposit payment Thursday, you can visit the Child Tax Credit Update Portal to see whether your information is up to date.

When will you get the payments?
The IRS plans to send direct deposits on the 15th of each month, so: July 15, Aug. 13 (this payment is early because the 15th falls on a Sunday), Sept. 15, Oct. 15, Nov. 15 and Dec. 15.

If you do not want to get payments on a monthly basis and would prefer to get the cash in a lump sum during tax season, you can update that preference on the IRS website. A White House official said about 1 million people have chosen to do that so far.

What if you don't file taxes?
If you were not required to file taxes in 2019 or 2020 or did not do so, you must update your information with the IRS to receive the benefit.

The IRS released an online tool where parents can register their information electronically. The tool does not work well on mobile devices, so it is best to use it on a laptop or a desktop computer. The tool is available only in English, but an administration official said Spanish and other languages are in the works.

If you did not receive the pandemic stimulus checks, the IRS will also use information uploaded to the non-filer tool to make sure you get those payments.

Lost your job? Got married? Had another kid?
If you had any significant life change that could affect how much money you are eligible for, you will need to update the information in a different IRS online tool (separate from the non-filer tool).

Changes in dependents, marital status and income, however, cannot be made until later in the summer.

As long as the information is updated this year, the IRS will give you back pay for any missed monthly credits.

When will the monthly expanded credit end?
The expanded credit ends in December. Biden has called for a four-year extension, which would need congressional approval. Other Democrats have called for making the expansion permanent.

How can the money be used?
However you'd like. Unlike other benefits, such as food stamps or housing vouchers, the child tax credit is unrestricted.

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